United States: The Affordable Care Act's Reporting Requirements For Carriers And Employers (Part 15 Of 24): Coding Form 1095-C, Part II For Offers Of COBRA Coverage

As we noted in a previous post, the recently issued final 2015 Instructions for Forms 1094-C and 1095-C changed certain of the rules relating to the reporting for offers of COBRA coverage where the COBRA qualifying event occurs in the reporting year. This post explains these changes in detail and also covers the reporting of COBRA in years subsequent to the year in which the qualifying event occurs.

Background—COBRA's Place in the Code § 4980H Scheme

The publication of final regulations under the Affordable Care Act's employer shared responsibility rules in February 2014 resulted in some initial confusion concerning the place of COBRA in the regulatory scheme. The source of the confusion, and how it manifested, was illustrated in 2015 American Bar Association/Joint Committee on Employee Benefits Q&As with the Treasury Department/IRS, Question 23.

NOTE: Representative members of the ABA Joint Committee on Employee Benefits and personnel from the Treasury Department and the IRS meet in May of each year for an informal Q&A session to discuss questions and proposed answers on current topics of interest submitted to the regulators in advance. The ABA members and their Treasury and IRS interlocutors spend a good deal of time and effort in soliciting, curating and responding to these questions, and participation by the regulators is particularly welcome. The sessions are transcribed and are posted to the ABA website. Importantly, the regulators' responses reflect their unofficial, individual views. The responses are not official guidance, and they may not be relied on. Nevertheless, they provide useful insight into the way the government representatives view a particular matter.

The facts in the Q&A are as follows:

Employer B (who has elected to use the look-back measurement method) utilizes a standard measurement period that begins on January 1 and ends on December 31 for purposes of determining its full-time employees. The corresponding standard stability period begins on the immediately following January 1 and ends on the following December 31. Employee A was hired as a full-time employee (i.e., 30 or more hours per week) on April 12, 2014. Employee A elected to enroll in Employer B's group health plan effective as of July 1, 2014. Employee A transferred to a part-time position on February 28, 2015 and became ineligible for coverage. Employee A's group health plan coverage terminates on February 28, 2015 in accordance with the terms of the plan.

The questioner asks, "What measurement period applies to Employee A when he becomes a part-time employee? How does COBRA interact with subsequent offers of coverage that may have to be made during 2015?"

In the proposed response, the questioner correctly assumes that Employee A must be offered COBRA coverage if he loses coverage as a result of his transfer to part-time status. The proposed response next assumes that "[i]f Employee A averages 30 hours of service per week during March 2015, Employer B must offer to reinstate Employee A's group health plan coverage immediately retroactively back to March 1, 2015." The proposed answer also assumes that, thereafter, any coverage that Employee A lost because he did not work 30 hours per week for a particular month would trigger a new offer of COBRA coverage.

The question is a thoughtful one. One need not stray too far (if at all) from the text of the final regulations to find support for it. Nevertheless, the IRS disagreed with the questioner's last two assumptions. Here, in relevant part, is what they had to say:

Based on the stated facts, Employee A was ineligible for group health plan coverage under the terms of the plan beginning February 28, 2015. Accordingly, Employer B may owe an assessable payment under Section 4980H(b) for any calendar month in which Employee A averages at least 30 hours a week, assuming that Employee A has purchased coverage on an exchange and receives a premium tax credit for that month. The offer of COBRA continuation coverage does count as an offer of coverage for Section 4980H purposes; however, this offer of coverage would be sufficient to avoid a Section 4980H(b) assessable payment only if the offer was affordable and provided minimum value. If Employer B wishes to avoid an assessable payment under Section 4980H(b), one option would be to offer subsidized COBRA coverage at a low enough cost to satisfy one of the affordability safe harbors. (Emphasis added).

The IRS goes on to observe that, "[t]he proposed answer as initially drafted seems to assume that Section 4980H could override the plan terms and require coverage in any month in which the employee is full-time for Section 4980H purposes. This is not the case." The response explains that Code § 4980H is relevant only for purposes of whether an assessable payment is owed. It does not dictate plan eligibility. The offer of COBRA coverage in the case of a reduction in hours may, however, affect affordability.

The "old" rules for COBRA reporting

The 2014 Instructions for Forms 1094-C and 1095-C provided rules (explained below) that applied where COBRA coverage is provided to an employee who was employed during any month of the reporting year. In Q&As posted to the IRS website, the IRS established two sets of rules, one for terminating employees and another for employees with a reduction in hours.

  • Terminated employees

For an employee who lost coverage as a result of termination, the proper reporting treatment depended on whether the employee enrolled in coverage, and who else enrolled (e.g., employee only, employee and spouse, etc.). Under this rule, an offer of COBRA continuation coverage made due to termination of employment was reported as an offer of coverage on Form 1095-C, Part II only if the former employee enrolled in the COBRA coverage. If COBRA coverage was offered to the former employee's spouse or dependents as well as the former employee, but only the former employee enrolled, the correct series-1 indicator code for Line 14 was 1B (Minimum essential coverage providing minimum value offered to employee only) (assuming, of course, that the coverage qualified as minimum essential coverage). But if the former employee elected COBRA coverage for additional family members, the series-1 indicator code for Line 14 indicated the type of coverage offered to the former employee, dependents and spouse. Lastly, if the former employee did not elect COBRA coverage, but a previously covered individual such as a spouse or dependent elected COBRA coverage, the coverage was not reported on Form 1095-C, Part II.

  • Reduction in hours

Where an employer makes an offer of COBRA continuation coverage to an employee who lost eligibility due to a reduction in hours (e.g., a change from full-time to part-time status resulting in loss of eligibility under the plan) the employer was instructed to report the offer of COBRA coverage as an offer of coverage in Part II of Form 1095-C.

The "new" rules for COBRA reporting

The 2015 instructions simplify the reporting for offers of COBRA coverage in the case of terminated employees. An offer of COBRA coverage made to a former employee upon termination of employment is no longer reported as an offer of coverage on line 14. Instead, series-1 code 1H (No offer of coverage) must be entered for any month for which the offer of COBRA continuation coverage applies. The 2015 instructions complete the reporting treatment for terminated employees as follows: "Do not enter code 2C in line 16 for any month in which a terminated employee is enrolled in COBRA continuation coverage (enter code 2A)."

An offer of COBRA continuation coverage that is made to an active employee (e.g., as a result of a reduction in hours resulting in the loss of eligibility for coverage under the plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee. Of course, if the employee cost increases (as it would if there is no employer subsidy—which is the common case) then the affordability calculus will change. This will be reflected in Form 1095-C, Part II, Line 15, and if the coverage is thereby rendered unaffordable Line 16 may also be affected.

NOTE: As of the date of this post, the IRS's Q&As cited above have not been updated to reflect the new COBRA reporting rules.

COBRA coverage provided to employees not employed during any month of the reporting year

The 2015 instructions cover the subject of COBRA coverage provided to employees not employed during any month of the reporting year under the heading of "Reporting of Enrollment Information for Non-Employees." There is no requirement to provide a Form 1095-C to a non-employee, but where coverage is provided, there is an obligation to provide a Form 1095-B and transmit on a Form 1094-B. In the case of a fully-insured plan, the carrier will have the obligation to provide the Form 1095-B and transmit on Form 1094-B.

In the case of a self-funded plan, employers that offer coverage to non-employees who enroll in the coverage (e.g., COBRA, retiree coverage, or coverage provided to non-employee directors) have an option: they may use Forms 1094-B and 1095-B, rather than Form 1095-C, Part III, to report the coverage provided to those individuals and family members, where appropriate. If the employer chooses to use Form 1095-C, Part III to report the coverage, the proper series-1 reporting code is 1G (offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-funded coverage for one or more months of the calendar year). The instructions hasten to add that, "[t]he Form 1095-C may be used only if the individual identified on line 1 has an SSN."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Alden J. Bianchi
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.